The first bitcoin transaction was for two pizzas back in 2010. Today, you can use cryptocurrency to buy a car, an online dating membership or anything for sale at the retailer Overstock.com. As cryptocurrency emerges as a viable method of payment for all types of services and goods, three cryptos — Bitcoin, Ethereum and Litecoin — are earning solidly reliable reputations. You can buy any of the three with Coinbase or another digital currency app. So, other than the price, what’s the difference?
Say the word "cryptocurrency" and most people immediately think of bitcoin, the oldest and most prominent digital currency in the world. With its own unicode character — use the code set "U+0243" to create the slashed "B" with your keyboard — most regard Bitcoin as the leader of the digital currency pack.
Each Bitcoin is the product of labor performed by digital miners and mining pools that use blockchain technology to solve a complicated numerical problem. Because the problem is difficult to solve, a large amount of computing power is required. It’s this computer power and labor plus the fact that a limited supply of Bitcoins can be produced that creates the value you see on the dashboard of your digital currency app.
Bitcoin cash, a variant of bitcoin, is a fork identical to Bitcoin with a larger block size limit.
Developed in 2011 by a former Google engineer, Litecoin is created by blockchain technology but is easier and quicker to process. Just like bitcoin, however, all transactions are public and the coins are stored in a digital wallet. You can use Litecoins at many of the retailers that accept bitcoins.
A Litecoin uses a process called simplified payment verification (SPV) that doesn’t require a local copy of an entire blockchain. There’s a catch — each Litecoin follows the longest blockchain without ensuring its validity, so you’re required to place some trust in the in the people and computers mining the coins. With less digital "weight" to process, Litecoins have better potential for use on mobile phones and tablets. Another key difference between Bitcoin and Litecoin is the number to be produced by miners. Bitcoin caps out at 21 million, Litecoin at 84 million. Despite their differences, the two cryptocurrencies are so similar that some think of Litecoin as the "silver" shining beside Bitcoin’s "gold."
Ethereum — around since 2014, when (like Bitcoin) it began as a white paper — is in the blockchain family like bitcoin, but it stands apart as more of a ideology and programming platform than an alternative to cold hard cash.
Open source and public, Ethereum is the digital product geared to decentralize the internet and weaken hackers who target proprietary cloud drives and other spaces owned by individuals and companies. The "splintered movement" revolving around Ethereum is rooted the idea that the client-server model is outdated — we should instead move toward a more communal "world computer" anchored by nodes established and run by impartial volunteers. The advantage? Intellectual property like notes, spreadsheets and other data stored in cloud drives would not leave the control of those who made it.
But how does Ethereum operate as a currency? As a unit known as "Ether," those who’ve invested in Ethereum trade the value with each in order to build a more decentralized internet. Its the popularity and promise among those involved that creates the value behind the notion of ether as a currency. The rapid gain in value among investors might be a strong hint that the idea of a more socialized approach to the internet could be catching on in a big way.
Some things haven’t changed in this exciting new world, and one is the concept of "buyer beware." As with any investment, it’s important to be aware of differences between cybercurrency products and buy with caution.